I. STATEMENT ON RATING

Slovenská ratingová agentúraTM (Slovak Rating Agency) enhanced the rating of the City of Bánovce nad Bebravou to:

Long-term crown rating	BBB- (stable outlook)
Long-term foreign exchange rating	BB (stable outlook)
Short-term rating	S2

The assigned long-term rating BBB- (stable outlook) in the category of transactions conducted in Slovak crowns is 3 degrees below the rating of a state (A – stable outlook). In the category of transactions conducted in foreign currencies the City of Bánovce nad Bebravou was assigned the rating BB (stable outlook). The short-term rating of the City of Bánovce nad Bebravou is S2, which is the best-possible short-termed rating of subjects that had been awarded a long-term rating of BBB-.

Substantiation:

• In the field of strategic planning, the city is engaged in preparations for the processing of its strategic socio-economic development plan; the project should be financed from the local and regional development grant scheme that is presently applied for by the city. Investing priorities for 2004 were planned on the basis of realistic financial options of the city.
  
  
• The Agency perceived that the city showed active approach to the processing of its application for drawing resources from funds of the European Union and from the national supporting programmes. Until recently, the city elaborated and submitted nearly 20 grant schemes in various frameworks toward the assurance of regional development, travel, culture, sports and environmental improvement.
  
  
• The city offers suitable opportunities to investors, thereby establishing conditions for the support and development of jobs, a feature positively evaluated by the Agency. Compared to the past period the city succeeded in making attractive and prepare additional industrial zones for the entry of investors – Horné Naštice, Horné Ozorovce and Biskupice. A zoning decision was already issued in respect of the industrial zone of Horné Ozorovce, and a prepared study indicated the prospective entry of a strong investor of national significance. The city assigned a company to execute land purchases for purposes of the Biskupice industrial park. Negotiations are now in progress about the accession of a foreign investor to the Horné Naštice industrial zone.
  
  
• The Agency positively evaluated that qualitative changes occurred in the field of liabilities arising from past guarantees and litigations. At present, there is only one guarantee-based liability recorded by the city, involving a commercial subject performing municipal services. However, the Agency recommends continuing in the performance of high-quality monitoring of the economic results not only of the aforesaid subject but of also other trading companies with ownership interest of the city.
  
  
• The city has a balanced financial management. Even with the city already adhering to the new budgeting indicators, the Agency recommends maintaining prudential approach to the issue of drawing new loans. The city reported a year-end 2003 indebtedness of 12.16 % in current revenues, and a 3.85 % debt service vs. current revenues ratio in 2002. The Agency positively evaluated the intent of the city to implement its investment projects while actively utilizing financial resources from the European Union and from supportive national programmes without the participation of loan instruments.

Please don't hesitate to address your questions to autner@slovakrating.sk, or call +421 2 5464 5151.

Slovak Rating Agency
Bratislava, 29 June 2004